V

PRODUCT POLICY DECISIONS

AN OVERVIEW OF A PRODUCT

A product is often considered in a narrow sense as something tangible that can be described in
terms of physical attributes, such as shape, dimension, components, form, color, and so on. This
is a misconception that has been extended to international marketing as well, because many
people believe that only tangible products can be exported. A student of marketing, however,
should realize that this definition of product is misleading since many products are intangible
(e.g., services). Actually, intangible products are a significant part of the American export
market. For example, American movies are distributed worldwide, as are engineering services
and business-consulting services. In the financial market, Japanese and European banks have
been internationally active in providing financial assistance, often at handsome profits. Even
when tangible products are involved, insurance services and shipping are needed to move the
products into their markets.

In many situations, both tangible and intangible products must be combined to create a single,
total product. Perhaps the best way to define a product is to describe it as a bundle of utilities or
satisfaction. Warranty terms, for example, are a part of this bundle, and they may be adjusted as
appropriate (i.e., superior versus inferior warranty terms). Purchasers of Mercedes-Benz cars
expect to acquire more than just the cars themselves. In hot and humid countries, there is no
reason for a heater to be part of the automobile’s product bundle. In the USA, it is customary for
automatic transmission to be included with other standard automobile equipment.

One marketing implication that may be drawn is that a multinational marketer must look at a
product as a total, complete offering. Consider the Beretta shotgun. The shotgun itself is
undoubtedly a fine product, quite capable of superbly performing its primary function (i.e., firing
shotgun ammunition). But Beretta also has a secondary function in Japan, where the Beretta
brand is perceived as a superior status symbol. Not surprisingly, a Beretta can command $8000
for a shotgun, exclusive of the additional amount of a few thousand dollars for engraving. In this
case, Beretta’s secondary function conceivably overshadows its primary objective.

Therefore, a complete product should be viewed as a satisfaction derived from the four Ps of
marketing (product, place, promotion, and pricing) – and not simply the physical product
characteristics.

PHYSICAL REQUIREMENTS AND ADAPTATION

A product may have to change in a number of ways to meet physical or mandatory requirements
of a new market, ranging from simple package changes to total redesign of the physical core
product. A recent study reaffirmed the often-reported finding that mandatory adaptations were
more frequently the reason for product adaptation than adapting for cultural reasons.

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Some changes are obvious with relatively little analysis; a cursory examination of a country will
uncover the need to rewire electrical goods for a different voltage system, simplify a product
when the local level of technology is not high, or print multilingual labels where, required by
law. Electrolux, for example, offers a cold-wash-only washing machine in Asian countries where
electric power is expensive or scarce. But other necessary changes may surface only after careful
study of an, intended market.

Legal, economic, political, technological, and climatic requirements of the localmarketplace

often dictate product adaptation.

 During a period in India when the government was very anti-foreign investment, Pepsi-
Cola changed its product name to Lehar Pepsi (in Hindi lehar means wave) togain as
much local support as possible. The name returned to Pepsi-Cola when the political
climate turned favorable.
 Laws that vary among countries usually set specific package sizes and safety, and quality
standards.
 To make a purchase more affordable in low-income countries, the number of units per
package may have to be reduced from the typical quantities offered in high - income
countries. Razor blades, cigarettes, chewing gum, and other multiple pack items are often
sold singly or two to a pack instead of the more customary 10 or 20.
 If the concept of preventive maintenance is unfamiliar to an intended market, product
simplification arid maintenance-free features may be mandatory for, successful product
performance.
 Changes may also have to be made to accommodate climatic differences. General Motors
of Canada, for example, experienced major problems with several thousand Chevrolet
automobiles shipped to a Middle east country; it was quickly discovered they were unfit
for the hot, dusty climate. Supplementary air filters and different clutches had to be added
to adjust for the problem. Even crackers have to be packaged in tins for humid areas.

PRODUCT ALTERNATIVES

When a company plans to enter a market in another country, careful consideration must be given
to whether or not the present product lines will prove adequate in the new culture. Will they sell
in quantities large enough and at prices high enough to be profitable? If not, what other
alternatives are available? The marketer has at least four viable alternatives when entering a new
market:

 Sell the same product presently sold in the home market (domestic market extension
strategy);
 Adapt existing products to the tastes and specific needs in each new country market
(multi-domestic market strategy);
 Develop a standardized product for all markets (global market strategy); or
 Acquire local brands and reintroduce.
An important issue in choosing which alternative to use is whether or not a company is starting
from scratch (i.e., no existing products to market abroad), whether it has products already
established in various country markets, or whether there are local products that can be more
efficiently developed for the local market than other alternatives.

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  For a company starting fresh, the prudent alternative is to develop a global product. If
the company has several products that have evolved over time in various foreign
markets, then the task is one of repositioning the existing products into global products.
In some cases, a company encounters a market where local brands are established and
the introduction of a company brand would take too long and be more costly than
acquiring the local brand. Nestle and Unilever have used this approach effectively in
Eastern Europe and Russia.
The success of these alternatives depends on the product and the fundamental need it Mills, its
characteristics, its perception within the culture, and the associated costs of each program. To
know that foreign markets are different and that different product strategies may be needed is ne
thing; to know when adaptation of your product line and marketing program is necessary is
another, more complicated problem.

SCREENING PRODUCTS FOR ADAPTATION

Evaluating a product for marketing in a country market requires a systematic method of

screening products to determine if there are cultural resistances to overcome and/or physical or
mandatory changes necessary for product acceptance. Only when the psychological (or cultural)
and physical dimensions of the product, as determined by the country market, are known can the
decision for adaptation be made. Using the “Analysis of Product Component” discussed below to
determine if there are mandatory or physical reasons why a product must be adapted can screen
products.

Before entering a market the international marketer can analyze the components of a product to
determine what features need to be adapted to ensure that the product meets both the market
perceived quality and performance quality. .

ANALYSIS OF PRODUCT COMPONENTS

A Figure on a Product Component Model

SUPPORT SERVICES
COMPONENT

PACKAGING COMPONENT
Deliveries
Repair and

Price

Maintenance Trademark
CORE Warranty
COMPONENT

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 Brand Quality

Installation Product platform

name

Design feature
Spare Parts

Functional
Legal Features Package
Other

Related Legal
Styling
services

Fig 5.1
A product is multidimensional, and the sum of all its features determines the bundle of
satisfactions (utilities) received by the consumer. To identify all the possible ways a product may
be adapted to a new market it helps to separate its many dimensions into three distinct,
components as illustrated in Fig 5.1 the Product Component Model.

By using this model, the impact of the cultural, physical, and mandatory factors that affect a
market's acceptance of a product can be focused on the core component, packaging component,
and support services component. These components include all the product's tangible and
intangible elements and provide the bundle of utilities the market receives from use of the
product.

 Core Component The core component consists of the physical product - theplatform that
contains the essential technology - and all its design and functional features.
 It is on the product platform that product variations can be added or deleted to
satisfy local differences. Major adjustments in the platform aspect of the core
component may be costly because a change in the platform can affect product
processes and thus require additional capital investment. However, alterations in
design, functional features, flavors, color, and other aspects can be made to adapt
the product to cultural variations.

 Packaging Component The packaging component includes style features,packaging,

labeling, trademarks, brand name, quality, price, and all other aspects of a product's
package.

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  A label is a part of a product that carries information about the product and the
seller. A label may be part of the package, or it may be a tag attached to the
product. Obviously there is a close relationship among labeling, packaging, and
branding.
 "Packaging includes the activities of designing and producing the container or
wrapper for a product."
 "A Brand is a name, term, sign, symbol, or design, or a combination of them,
intended to identify the goods or services of one seller or group of sellers and to
differentiate them from those of competitors".
 As with the core component, the importance of each of these elements in the eyes of the
consumer depends on the need that the product is designed to serve.
 Packaging components frequently require both discretionary and mandatory changes. For
example,
 Some countries require labels to be printed in more than one language, while
others forbid the use of any foreign language.
 Elements in the packaging component may incorporate symbols, which convey an
unintended meaning and thus must be changed. One company's red-circle
trademark was popular in same countries but was rejected in parts of Asia, where
it conjured up images of the Japanese flag. Yellow flowers used in another
company trademark were rejected in Mexico, where a yellow flower symbolizes
death or disrespect.
 Package size and price have an important relationship in poor countries.
Companies find that they have to package in small units to bring the price in line
with spending norms.

 There are countless reasons why a company might have to adapt a product's package.

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  In some countries, law stipulates specific bottle, can, package sizes, and
measurement units. If a country uses the metric system, it will probably require
that weights and measurements conform to the metric system. Such descriptive
words as "giant" or "jumbo" on a package or label may be illegal.
 High humidity and/or the need for long shelf life because of extended
distribution systems may dictate extra-heavy packaging for some products. A
poorly packaged product conveys an impression of poor quality to the Japanese. It
is also important to determine if the packaging has other uses in the market.

 Labeling law varies from country to country and does not seem to follow any predictable
pattern.
 In Saudi Arabia, for example, product names must be specific. "Hot Chili " will
not do: it must be "Spiced Hot Chili."
 Prices are required to be printed on the labels in Venezuela, but in Chile it is
illegal to put prices on labels or in any way suggest retail prices.
 Coca-Cola ran into a legal problem in Brazil with its Diet Coke. Brazilian law
interprets diet to have medicinal qualities. Under the law, producers must give
daily recommended consumption on the labels of all medicines. Coca Cola had to
get special approval to get around this restriction.
 Chinese labeling law requires that food products must have their name, contents,
and other specifics listed clearly in Chinese printed directly on the package.
Labeling laws create a special problem for companies selling products in various
markets with different labeling laws and small initial demand in each. Forward-
thinking manufacturers with wide distribution in Asia are adopting packaging
standards comparable to those required in the European Union, by providing
standard information in several different languages on the same package. A
template is designed with a space on the label reserved
for locally required content, which can be inserted depending on the destination of
a given production batch.
Marketers must examine each of the elements of the packaging component to be certain
that this part of the product conveys the appropriate meaning and value to a new market.
Otherwise they may be caught short, as was the U.S. soft-drink company that
incorporated six-painted stars as decoration on its package labels. Only when
investigating weak sales did they find out that they had inadvertently offended some of
then Arab customers who interpreted the stars as symbolizing pro-Israeli sentiments.

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  Support Services Component The support service component includes repair
andmaintenance, instructions, installation, warranties, deliveries, and the availability of
spare parts. Many other wise successful marketing programs have ultimately failed
because little attention was given to this product component.

 Repair and maintenance are especially difficult problems in developing countries.

 Literacy rates and educational levels of a country may require a firm to change a
product's instructions.
 A simple term in one country may be incomprehensible in another. In rural
Africa, for example, consumers had trouble understanding that Vaseline Intensive
Care lotion is absorbed into the skin. Absorbed was changed to soaks into, and
the confusion was eliminated. \
 The Brazilians have successfully overcome low literacy and technical skills of
users of the sophisticated military tanks they sell to Third World countries. They
include videocassette players and videotapes with detailed repair instructions as
part of the standard instruction package. They also minimize spare parts
problems by using standardized, off -the-shelf parts available throughout the
world.

The Product Component Model can be a useful guide in examining adaptation requirements of
products destined for foreign markets. A product should be carefully evaluated on each of the
three components far mandatory and discretionary changes that may be needed.

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